OBJECTIVES: To assess the significance of pleural fluid cholesterol levels in differenting transudative and exudative pleural effusion as compared with light’s criterion. MATERIAL AND METHODS: 100 patients of pleural effusion from wards of TB and chest Hospital, Patiala, Punjab were studied. A detailed clinical history, a thorough physical examination and routine radiological and laboratory investigations were carried out in all the patients. Patients were clinically divided into exudative and transudative groups.The value of protein, LDH and cholesterol were estimated in pleural fluid along with serum cholesterol and protein. Sensitivity, specificity, PPV, NPV and accuracy of all parameters were calculated with the cut off of cholesterol as 60 mg/dl. RESULTS: Pleural cholesterol has sensitivity and specificity of 92.6% and 100% respectively to differentiate between exudative and transudative pleural effusion. CONCLUSION: Pleural cholesterol as a parameter to separate exudative pleural effusion from transudative is easier, efficient, cost effective and there is no need of blood sample.